Key Takeaways
- South Korean lawmakers have made stablecoin regulation a priority.
- Banks in the country are preparing to issue KRW stablecoins.
- Legalizing won-pegged stablecoins has taken on greater urgency since the passage of the U.S. GENIUS Act.
With the U.S. GENIUS Act already accelerating the global adoption of dollar-pegged stablecoins, the South Korean government is scrambling to legalize won-based digital assets.
Under the country’s Digital Asset Basic Act, which is expected to pass through the National Assembly this year, commercial banks could be the first entities allowed to issue stablecoins, and many are already laying the groundwork for future launches.
South Korean Banks Anticipate Stablecoin Regulation
When the Digital Asset Basic Act was proposed in June, it catalyzed an explosion of interest in won-backed stablecoins, which have been illegal up until now.
In June, eight of the country’s largest banks formed a consortium to develop a KRW stablecoin.
Meanwhile, KB Kookmin has filed 32 trademarks related to won stablecoins and an additional 49 related to foreign currency stablecoins.
Although the Digital Asset Basic Act doesn’t explicitly bar non-banks from issuing coins, Bank of Korea Governor Rhee Chang-yong has made it clear that he wants commercial banks to take the lead.
“If we allow non-banks to issue stablecoins, this will cause major chaos,” he cautioned in July.
The Central Banker’s stance sets the stage for a clash with South Korean lawmakers who favor a less restrictive regulatory environment.
Competing Visions for Stablecoin Policy
Under the Digital Asset Basic Act, companies with as little as 500 million won in capital could be eligible to issue stablecoins.
However, the oversight regime issuers are ultimately bound by may depend on additional legislation.
South Korea’s ruling and opposition parties have both proposed GENIUS Act-style bills in the National Assembly, which offer competing visions for stablecoin regulation.
With the central bank and rival political factions at odds over key aspects of stablecoin policy, one thing most parties agree on is the need to insulate South Korea’s economy against digital dollarization.
Preventing a Tsunami
Comparing the situation in the U.S. versus South Korea, Seoul has taken the opposite approach to Washington, prioritizing the generalist Digital Asset Basic Act over dedicated stablecoin legislation. However, the American model has created new challenges for Korean lawmakers.
Even before the passage of the GENIUS Act, dollar-pegged tokens dominated the global stablecoin market.
Now, with Washington throwing its weight behind the sector, Korean officials fear that failing to act quickly could lead to the won being marginalized.
“When the tsunami of dollar stablecoins arrives, the Korean won may barely be used at all,” National Assembly member Min Byung-deok warned recently.
Comparing the evolution of situation in the U.S. versus South Korea, Seoul has taken the opposite approach to Washington, prioritizing the generalist Digital Asset Basic Act over dedicated stablecoin legislation.
